MARKET COMMENTARY - MARCH / APRIL 2008
February was the first month where sales were actually lower than the same month last year in the past twelve months. The Toronto Real Estate Board reported that residential sales were down by 11%. For condos, sales were off by only 3% but Downtown condo sales were lower by 15%! Already the so-called experts are saying the market has turned. The only problem is that they don't have all the facts! Believe it or not weather and snow had a big impact. Real estate sales are not 'date sensitive'. People don't have to buy on a particular date. If the weather is bad, they just stay home. And the snow storm on the first weekend in March will impact March numbers as well! How many people remember SARS five years ago? For two months people would not leave their property except to go to work. As a Company, we even talked about buying masks for people to wear when we showed properties. Sales were that bad. But the market fundamentals had not changed and the market resumed its upward trend after the SARS scare.
So where are we today? Market fundamentals have not changed. In fact we think the market is stronger today than at the end of last year. Forecasts for the Ontario economy suggest that growth may reach 2% this year as opposed to earlier forecasts of less than 1%. We can tell you that parts of Ontario will actually shrink which means that the GTA economy will probably grow by at least by 3%. Incomes are rising, and with a half percentage drop in variable mortgage rates, there are lots of buyers! How do we know? All our agents have qualified buyers lined up. The problem is that there are not a lot of listings to show them yet! The sales-to-listing ratio is currently 45% - a normal market is in the 25-35% range. The first sign of a changing market is when listings swamp the market. The second is when affordability is eroded. Neither exists in this market!! We are not naïve enough to believe that this market will go up forever. However the time for a slump is not this year.
In this issue, we looked at sales in Marina Del Rey - 2261 Lake Shore on the Etobicoke waterfront. There are three buildings on a great piece of property with a stand alone recreational facility. Units are larger and while the buildings are older, they are well-maintained and represent good value. While other condo markets increased in value, the Etobicoke market was flat for a number of years and only in 2007 did prices begin to increase. The first unit we tracked was a one-bedroom loft, just under 900 sq.ft. with parking. The unit has been renovated and sold for $247,000 in December. The very same unit sold twenty one months earlier for $245,000. A similar unit, not renovated, sold for $196,000 in 2004. It was renovated and was resold in February of this year for $255,000. When you back out the renovation costs, the appreciation was only 10% over three years! Prices are $280 per sq.ft. The second unit we examined was a two-bedroom, two storey loft at 1040 sq.ft. It was partially renovated and sold in January for $290,000. We tracked similar units that sold for $240,000 in 2004; and $275,000 in late 2007 that were not renovated. Again this unit is selling for $280 per sq.ft.
Over 100 one-bedroom unfurnished units were leased Downtown in February. The average price was $1525. Only 17 furnished suites were leased at an average of $1775. There were 62 unfurnished two-bedroom units leased for $2100 on average. Eight furnished two-bedroom units averaged $2500. The differential between furnished and unfurnished is $250-500 per month. Compare this to the monthly cost to rent furniture which is quoted at $300 for a basic one-bedroom. Days-on-market to rent out units has increased from the 15 day range to 20+ days. The rental market usually begins to heat up in May through September. Again the weather has slowed the start of the rental season.